By Mauricio Sanchez
2024 is shaping to be a year of correction across most enterprise network markets, as indicated by a notable decline in spending among key segments. This correction follows extraordinary growth from 2021 to 2023, driven by the surge in demand caused by the pandemic. Now, as enterprises work through the backlog of pandemic-driven investments and face excess inventory, coupled with cautious spending due to ongoing economic uncertainty, the five key enterprise network markets; Network Security, Branch Routing, Campus Switching, WLAN, and Enterprise Data Center Switching, are poised for varying degrees of growth deceleration and all but one an outright contraction.
Common Trends Across Enterprise Networking Markets
Across all five segments, a significant driver of the 2024 correction is a period of “enterprise digestion,” where organisations deploy the substantial purchases made during the pandemic and subsequent supply chain recovery periods. This digestion phase is compounded by excess inventory in the channel, leading to a slowdown in new equipment deliveries.
Moreover, macroeconomic factors such as inflation and tightening IT budgets are dampening network infrastructure investments. The broader technology market faces some pullbacks as companies reevaluate spending in light of potential economic uncertainties. For many vendors, the tailwinds provided by large backlogs of orders during the pandemic have dissipated, and there is now a recalibration as the market waits for demand to return to a more normalised, pre-pandemic level.
Network Security: Adjusting After High Growth
The Network Security market, with firewalls as its largest segment, has faced significant headwinds in 2024 as enterprises work through existing hardware investments. The slowdown reflects a broader trend in the industry, where organisations, having invested heavily in physical firewall solutions during the pandemic, are now focused on optimising those assets rather than purchasing new hardware. At the same time, growth in non-hardware solutions like Security Service Edge (SSE) and virtual firewalls has helped cushion the decline, but even SSE is seeing a deceleration. After years of explosive growth, SSE investments are beginning to normalise as enterprises slow their spending to integrate existing deployments fully. This shift signals a cooling from the rapid pace of adoption seen in prior years, though the demand for flexible, cloud-based security solutions remains vital for the long term.
Branch Routing (SD-WAN and Access Routers): Temporary Slowdown Amid Strategic Shifts
The Branch Routing market, which encompasses SD-WAN and traditional access routers, is experiencing a slowdown in 2024 as enterprises take a strategic pause following the rapid expansion of these technologies during the pandemic. SD-WAN saw significant growth as organisations took the opportunity to invest in branch transformation to provide a better network experience at lower TCO at the branch. Still, this surge has now led to inventory overhangs. Additionally, the ongoing integration of SD-WAN functionality into broader Secure Access Service Edge (SASE) frameworks has shifted purchasing behavior. Enterprises are focusing on consolidating and optimising their existing deployments rather than making new investments, contributing to the temporary softness in the market.
Campus LAN (WLAN and Campus Switching): Post-Pandemic Normalisation
The Campus Switching and WLAN markets are enduring a similar correction as the post-pandemic glut of equipment deliveries is digested. After enjoying strong growth from 2021 to 2023, WLAN sales have contracted in 2024 as enterprises and distributors have worked through high stock levels accumulated during the supply chain recovery.
For Campus Switching, the slowdown has also been dramatic, especially in North America, where revenues have been dropping sharply following a peak in 2023. Excessive backlogs cleared in 2023 have led to a steep decline in new orders. Still, the rise of Power over Ethernet (PoE) technology and higher-speed ports, such as 2.5 Gbps and 5 Gbps, could offer growth opportunities as organisations prepare their networks for Wi-Fi 7, whose adoption began to accelerate in 2Q24
Enterprise Data Centre Switching: The Weakest Segment
The Enterprise Data Center Switching market has been hit the hardest in 2024 thus far. Despite some growth in the broader data center market due to AI-related investments, the enterprise segment has struggled as traditional front-end deployments face intense inventory challenges. The contraction is driven by prolonged backlog normalisation and fewer large-scale deployments in non-cloud enterprise environments. The long upgrade cycles for enterprise data centres and a strategic pivot towards cloud and AI back-end networks have made this sector particularly vulnerable.
Outlook for 2025: A Return to Growth
Despite the contraction in 2024, the outlook for 2025 is brighter. The fundamental demand for digital transformation, cloud migration, and hybrid work solutions remains intact. As enterprises complete the digestion of their current investments and inventories normalise, spending is expected to rebound. The rise in adoption of AI-driven workloads, 5G, Wi-Fi 7, and advanced security frameworks like SASE will drive growth across the network infrastructure landscape. Furthermore, as inflation and interest rates decrease, enterprises will benefit from improved capital availability, providing further tailwinds for market growth.
However, the Enterprise Data Centre Switch market is an exception, as it is not expected to return to growth in 2025. This segment is expected to face challenges. As enterprises continue to embrace the cloud or AI, they will increasingly be on public clouds, reducing the need to expand or refresh their on-premises data centre footprint. As a result, further contraction is anticipated for enterprise data centre switching, even as other markets recover and expand.
In conclusion, while 2024 is a year of necessary correction following unprecedented growth, the long-term prospects for enterprise network markets remain buoyant. Much of the industry is poised for recovery and growth in 2025, fueled by security, connectivity, and digital infrastructure innovations.
